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Atchuthan Srirangan, Assistant Manager – Research, at First Capital on the Bond and equity Market performance – 15.07.2019

Treasury Bills and Bonds in Sri Lanka

Atchuthan Srirangan, Assistant Manager – Research, at First Capital on the bond and equity market performance – 15.07.2019

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research delivers a heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Nisansala Kuruppumudali, Research Analyst, at First Capital on the bond and equity market performance – 11.07.2019

Treasury Bills and Bonds in Sri Lanka

Nisansala Kuruppumudali, Research Analyst, at First Capital on the bond and equity market performance – 11.07.2019

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Hiruni Perera from First Capital commenting on the bond and equity market performance -10.07.2019

Hiruni Perera, Senior Research Analyst at First Capital commenting on the bond and equity market performance – 10.07.2019

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

Atchuthan Srirangan, Assistant Manager – Research, at First Capital on the Bond and equity Market performance – 09.07.2019

Treasury Bills and Bonds in Sri Lanka

Atchuthan Srirangan, Assistant Manager – Research, at First Capital on the bond and equity market performance – 09.07.2019

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research delivers a heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.

CB to hold policy rates

DAILY FT | 10.07.2019

Treasury Bills and Bonds in Sri Lanka

Investment Bank in Sri Lanka

  • CB likely to keep monetary policy unchanged to allow impact of previous rate cut to materialise 
  • But effect could be delayed due to high NPLs  
  • Further 25 bps rate cut possible in 4Q if growth fails to pick up
  • Macroeconomic fundamentals showing steady improvement 

First Capital Research yesterday said the Monetary Board of the Central Bank (CBSL) is likely to keep policy rates unchanged when they meet this week to allow for the earlier rate reduction to take effect and filter through markets.

“Considering the fact that it is too early to assess the impact of the previous 50 bps rate cut, we believe that the Monetary Board would continue the policy rates with no change. We believe the Monetary Board may first consider CBSL’s ability to implement lending rate caps before further policy rate cuts are implemented,” the report from First Capital said.

“However, considering the slowness of the economy and the contraction of credit, we would not rule out a further 25 bps rate cut towards 4Q2019, if economic growth fails to accelerate,” it added.

The CBSL cut rates by 50 basis points after the Easter Sunday attacks, given subpart growth seen earlier this year, to provide economic stimulus. Since then macroeconomic fundamentals have shown a steady improvement with Sri Lanka, maintaining an acceptable level of reserves and raising $ 2 billion from international capital markets.

“Following the bond issuance, we expect foreign reserves to show significant improvement reaching above $ 8 billion in June while maintaining above $ 7.5 billion during July to December. Cabinet approval was obtained to raise up to Rs. 480 billion for debt management through the Liability Management Act, which provides leeway for CBSL to raise further $ 2.5 billion as indicated to manage debt in 2020, which would be a year with multiple elections. Sri Lanka’s next international sovereign repayment is only due in October 2020 amounting to $ 1 billion while 1Q and 2Q each constitute $ 400 million of SLDBs maturing. Raising funds well in advance for repayments is expected to significantly strengthen macroeconomic outlook for Sri Lanka and to reduce unnecessary volatility,” First Capital Research said.

Impact of the previous rate cut may take time to materialise, the organisation said with the high Non-Performing Loans (NPLs) possibly delaying the dip in lending rates.

“However, in order to accelerate the reduction in lending rates, as previously indicated by the CBSL, we expect imposition of a cap on lending rates to enhance credit flows to the economy with the intention of boosting the economic and credit growth.”

During the month of June, USD:LKR remained stable to close at 176.42 on 28 June supported by foreign inflows, exporter conversions and contraction in imports. However, REER (2017=100) continued to remain undervalued at 91.95 in May, First Capital research said with estimates for it to be 92.35 in June.

The external environment is favouring lower yields as the weakening US economy led the Fed to rethink its interest rate normalisation strategy resulting in Fed indicating a likely monetary easing in upcoming meetings. The situation has weakened the dollar further supporting the stability of the rupee, the report said.

Central Bank seen standing pat on rates; but 25 bps rate cut likely year-end

DAILY MIRROR | 09.07.2019

The Central Bank will most likely stay pat in this month after it cut the key policy rates on May 31 by 50 basis points to revive a tottering economy, said First Capital Research, leaving space for another 25 basis point cut towards the final quarter of 2019, if the economy fails to get back on its knees.

Releasing a pre-policy analysis, the equity research firm stated that it believes the Central Bank could resort to lending rate caps before further policy easing, if the earlier policy easing fails to or delays in bringing the desired outcomes.

The Monetary Board turned dovish since April and the next monetary policy decision is due on July 11.

“Considering the fact that it is too early to assess the impact of the previous 50 bps rate cut, we believe that the monetary board would continue the policy rates with no change.

However, considering the slowness of the economy and the contraction of credit, we would not rule out a further 25 bps rate cut towards 4Q 2019, if economic growth fails to accelerate,” First Capital Research said

The research house last week gave an unusually positive assessment of the economy predicting an accelerated recovery in the economy receiving a tailwind from the lower interest rates.

Other analysts who remained largely skeptical of a faster turnaround stated structural issues and the lack of confidence in the economy by all its actors run much deeper than one would see from the daily headlines.

They say the failure in public policy during the last four and a half years has stifled business and consumer sentiment and putting that back on track needs much more than tweaking the monetary policy.

In a most recent meeting with bank executives, the Central Bank has indicated its desire to pursue growth over maintaining prices, Mirror Business learns.

Sri Lanka’s reported headline inflation hovers around 4.0 percent.

The current Central Bank Governor Indrajit Coomaraswamy repeatedly stated that he would avoid economic sugar highs through policy easing to give way to a sustained economic growth model.

As the current dispensation accelerates fiscal spending, mostly election-oriented, Sri Lanka is largely expected to overshoot its budgeted fiscal deficit target for this year. Higher fiscal deficits have been the chronic economic malaise in Sri Lanka plaguing the country into deep debt crises.

The country’s financial sector is also plagued with higher non-performing loans and has been teetering for much of the year.

Rupee Steady Ahead of Interest-Rate Decision: Inside Sri Lanka

Treasury Bills and Bonds in Sri Lanka

(Bloomberg) — Sri Lanka’s rupee was little changed ahead of the central bank’s monetary policy announcement in Colombo later this week.

* The monetary authority is scheduled to announce its rate decision on Thursday 4:30 p.m. Colombo time; all economists in a Bloomberg survey expect benchmark rates to be left unchanged.

* “We believe there is a strong case for a continuation of the policy rates while permitting the effect of the recent cut to materialize,” analysts at First Capital Research said in a note
* USD/LKR steady at 176.08.

* The yield on the nation’s 9.45% bonds due October 2021 fell 19bps Monday to 9.21%.

* Overseas investors bought a net $0.1m of local equities on Monday, helping pare withdrawals this year to $38.5m: exchange data

* Survey: Sri Lanka economy to expand 1.5% in 2Q19; prior +3.5%

Sri Lanka Economy to Expand 1.5% in 2Q19; Prior +3.5%

Stock Market Sri Lanka

(Bloomberg) — The Sri Lanka economy will expand 1.5% in 2Q, according to the latest results of a Bloomberg News survey of 11 economists conducted from July 2 to July 8.

* GDP 3Q19 +2.1% y/y vs prior +3.6%

* GDP 4Q19 +3% y/y vs prior +3.7%

* GDP 2019 +2.7% y/y vs prior +3.5%

* GDP 2020 +3.8% y/y vs prior +3.8%

* Dimantha Mathew, head of research at First Capital Holdings: “Production and SME business was at a complete standstill for nearly four weeks while sentiment was very weak for a further two weeks before we saw any recovery.”

* CPI 3Q19 +4.3% y/y vs prior +4.7%

* CPI 2019 +4.5% y/y vs prior +4.5%

Monetary Policy to be maintained

Treasury Bills and Bonds in Sri Lanka

DAILY NEWS | 09.07.2019

The monetary board would continue the policy rates with no change, considering the fact that it is too early to assess the impact of the previous 50bps rate cut, First Capital Research said in a report.

“We believe that Monetary Board may first consider, CBSL’s ability to implement lending rate caps before further policy rate cuts being implemented. However, considering the slowness of the economy and the contraction of credit, we would not rule out a further 25bps rate cut towards 4Q2019, if economic growth fails to accelerate,” according to Pre-Policy Analysis by First Capital.

A sustained positive liquidity position was maintained resulting from multiple SRR cuts in Nov 2018 and Mar 2019 and due to release of long-delayed payments by the government. Net Contraction in credit during Jan-Apr 2019 period is likely to have also supported the improvement in liquidity. Considering the period within which a policy rate cut was implemented, we believe it may take a lengthier period for lending rates in the market to decline and stimulate growth.

The high level of NPL in the system may delay the dip in lending rates. However, in order to accelerate the reduction in lending rates, as previously indicated by the CBSL, we expect imposition of a cap on lending rates to enhance credit flows to the economy with the intention of boosting the economic and credit growth.

The report added, “In line with our expectation of an “inevitable rate cut”, CBSL reduced the SLFR and SDFR by 50bps as they believed, policy intervention was required to address the subpar economic growth which was further affected by the Easter Sunday attacks.”

“Sri Lanka maintained foreign reserve position at USD 6.7Bn as at 31st May 2019 which is noteworthy considering the major outflows in Apr 2019. Furthermore, SL successfully raised USD 2.0Bn by conducting an International Sovereign Bond offering tenors of 5 and 10 year. Following the issuance, we expect the foreign reserves to show significant improvement reaching above USD 8.0Bn in Jun 2019 while maintaining above USD 7.5Bn during Jul to Dec 2019. Cabinet approval was obtained to raise up to LKR 480.0Bn for debt management through liability management act, which provides leeway for CBSL to raise further USD 2.5Bn as indicated to manage debt in 2020, which would be a year with multiple elections. Sri Lanka’s next international sovereign repayment is only due in Oct 2020 amounting to USD 1.0Bn while 1Q and 2Q each constitute USD 0.4Bn of SLDBs maturing. Raising funds well in advance for repayments is expected to significantly strengthen macro economic outlook for Sri Lanka and to reduce unnecessary volatility.”

LKR remained stable to close at 176.42 on 28th Jun 2019 supported by foreign inflows, exporter conversions and contraction in imports. However, REER (2017=100) continued to remain undervalued at 91.95 in May 2019 while we estimate it to be 92.35 in Jun 2019.

The external environment is favoring lower yields as the weakening US economy led the Fed to rethink its interest rate normalization strategy resulting in Fed indicating a likely monetary easing in upcoming meetings. The situation has weakened the dollar further supporting the stability of rupee.

FCR Pre-Policy Analysis Monetary Policy to be maintained

CEYLON TODAY | 09.07.2019

Share Market Investment in Sri Lanka

By First Capital Research

 

Previous Pre-Policy issue; CBSL reduces its policy rates by 50bps
In line with our expectation of an “inevitable rate cut,” CBSL reduced the SLFR and SDFR by 50bps, as they believed policy intervention was required to address the subpar economic growth, which was further affected by the Easter Sunday attacks.

 
Macroeconomic fundamentals have shown a steady improvement

 
SL maintained foreign reserve position at US$ 6.7 billion as at 31 May 2019, which is noteworthy considering the major outflows in April 2019. Furthermore, SL successfully raised US$ 2 billion by conducting an International Sovereign Bond offering of five- and 10-year tenors.

 
Following the issuance, we expect the foreign reserves to show significant improvement, reaching above US$ 8 billion in June 2019 while maintaining above US$ 7.5 billion during July to December 2019.

 
Cabinet approval was obtained to raise up to Rs 480 billion for debt management through the Liability Management Act, which provides leeway for CBSL to raise a further US$ 2.5 billion as indicated to manage debt in 2020, which would be a year with multiple elections.

 
Sri Lanka’s next international sovereign repayment is only due in October 2020, amounting to US$ 1 billion, while 1Q and 2Q each constitute US$ 0.4 billion of SLDBs maturing. Raising funds well in advance for repayments is expected to significantly strengthen macroeconomic outlook for Sri Lanka and to reduce unnecessary volatility.

 
Impact of the previous rate cut may take time to materialise
A sustained positive liquidity position was maintained resulting from multiple SRR cuts in November 2018 and March 2019 and due to the release of long-delayed payments by the Government. Net Contraction in credit during the January-April 2019 period is likely to have also supported the improvement in liquidity.

 
Considering the period within which a policy rate cut was implemented, we believe it may take a lengthier period for lending rates in the market to decline and stimulate growth. The high level of NPL in the system may delay the dip in lending rates. However, to accelerate the reduction in lending rates, as previously indicated by the CBSL, we expect imposition of a cap on lending rates to enhance credit flows to the economy with the intention of boosting the economic and credit growth.

 
During the month of June, the USD:LKR remained stable to close at 176.42 on 28 June 2019 supported by foreign inflows, exporter conversions and contraction in imports. However, REER (2017=100) continued to remain undervalued at 91.95 in May 2019, while we estimate it to be 92.35 in June 2019. The external environment is favouring lower yields, as the weakening U.S. economy led the Fed to rethink its interest rate normalisation strategy, resulting in the Fed indicating a likely monetary easing in upcoming meetings. The situation has weakened the dollar, further supporting the stability of rupee.

 
Policy rates to be maintained as additional time is required to assess the impact of the previous cut
Considering the fact that it is too early to assess the impact of the previous 50bps rate cut, we believe that the Monetary Board would continue the policy rates with no change.

 
We believe that the Monetary Board may first consider CBSL’s ability to implement lending rate caps before further policy rate cuts are implemented. However, considering the slowness of the economy and the contraction of credit, we would not rule out a further 25bps rate cut towards 4Q2019, if economic growth fails to accelerate.

 

 

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.